6
August
2024
Roemer Capital Initiated Coverage of Greek Banks
Roemer Capital initiated coverage on the Big Four Greek bank stocks – Piraeus, Eurobank and Alpha with Buy ratings, and NBG with a Hold. Fundamentally, the Four have delivered a dramatic recovery: with a tailwind from interest rates, margins, profits and capital adequacy have surged, with above-forecast earnings accompanied by a relief re-rating. However, with policy rates now on the decline, and costs and provisioning normalised, the potential to beat expectations has diminished, requiring a selective approach.
As potential risks we can point to steeper policy rate cuts and rising share of time deposits, resurgence of asset quality problems, possible technical pressure from HFSF exiting NBG Loans – uneven acceleration on the cards. Latent demand in Greece should be better than in the Eurozone. Given the differences in access to liquidity, profitability and with an eye on M&A, we see the fastest loan growth at Eurobank, with solid organic growth at NBG and Piraeus. Alpha, meanwhile, may continue to trail its peers.
“We expect multiples to continue to rise toward the level of European peers on a longer-term horizon, as Greek banks should benefit from better asset growth, fattening capital buffers and sharp and sustainable increases in distributions via dividends and buybacks. - said Roemer Capital analyst Alex Kantarovich, - Our top pick in the sector is Piraeus, owing to the best risk-adjusted valuation, a benign risk profile and the lowest multiples”. Acknowledging NBG’s fundamental strength, Roemer Capital rates the shares as Sell on demanding multiples, limited TP upside and share overhang. Eurobank and Alpha are arguably riskier, however attractive valuations should prevail.
For NBG net interest margin saw the best growth during the period of rising rates, but now it is comparatively more exposed to the inevitable ECB cuts, whereas Eurobank and Alpha more resilient. Operating efficiencies diverge. The larger domestic networks and headcount of NBG and Piraeus suggest scope for further optimization. For Alpha, room for further cuts is limited after an aggressive downsizing. Eurobank may be able to reduce overhead upon finalizing the acquisition of Hellenic.
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01
August
2024
Roemer Capital Joins Astana International Exchange as a Trading Member